FEES AND DISBURSEMENTS

Reasonable Fees and Disbursements

3.6-1 A lawyer must not charge or accept a fee or disbursement, including interest, unless it is fair and reasonable and has been disclosed in a timely fashion.

Commentary

[1] What is a fair and reasonable fee will depend upon such factors as:

(a) the time and effort required and spent;

(b) the difficulty of the matter and the importance of the matter to the client;

(c) whether special skill or service has been required and provided;

(d) the results obtained;

(e) fees authorized by statute or regulation;

(f) special circumstances, such as the postponement of payment, uncertainty of reward, or urgency;

(g) the likelihood, if made known to the client, that acceptance of the retainer will result in the lawyer’s inability to accept other employment;

(h) any relevant agreement between the lawyer and the client;

(i) the experience and ability of the lawyer;

(j) any estimate or range of fees given by the lawyer; and (k) the client’s prior consent to the fee.

[1A] A fee will not be fair and reasonable and may subject the lawyer to disciplinary proceedings if it is one that cannot be justified in the light of all pertinent circumstances, including the factors mentioned, or is so disproportionate to the services rendered as to introduce the element of fraud or dishonesty, or undue profit.

[2] The fiduciary relationship between lawyer and client requires full disclosure in all financial dealings between them and prohibits the acceptance by the lawyer of any hidden fees.

No fee, extra fees, reward, costs, commission, interest, rebate, agency or forwarding allowance, or other compensation related to professional employment may be taken by the lawyer from anyone other than the client without full disclosure to and the consent of the client or, where the lawyer’s fees are being paid by someone other than the client, such as a legal aid agency, a borrower, or a personal representative, without the consent of such agency or other person. An example of conduct which may offend this rule is a lawyer who applies little skill or effort in assisting a client in obtaining periodic indemnity benefits, and charges an administration fee for collecting such monies or a fee which is calculated as a percentage of such benefits.

[3] A lawyer should provide to the client in writing, before or within a reasonable time after commencing a representation, as much information regarding fees and disbursements, and interest, as is reasonable and practical in the circumstances, including the basis on which fees will be determined. A legal assistant’s time for tasks specific to the client, and for which the legal assistant is qualified and able to carry out, may be charged to the client at a fair and reasonable rate provided that the lawyer advises the client in advance, preferably in writing, of the intention to do so and the rate to be charged.

[4] A lawyer should be ready to explain the basis of the fees and disbursement charged to the client. This is particularly important concerning fee charges or disbursements that the client might not reasonably be expected to anticipate. When something unusual or unforeseen occurs that may substantially affect the amount of a fee or disbursement, the lawyer should give to the client an immediate explanation. A lawyer should confirm with the client in writing the substance of all fee discussions that occur as a matter progresses and a lawyer may revise an initial estimate of fees and disbursements.

Contingent Fees and Contingent Fee Agreements

3.6-2 Subject to rule 3.6-1 and section 55 of The Legal Profession Act, a lawyer may enter into a written agreement that provides that the lawyer’s fee is contingent, in whole or in part, on the outcome of the matter for which the lawyer’s services are to be provided.

Commentary

[1] In determining the appropriate percentage or other basis of the contingency fee, a lawyer and client should consider a number of factors, including the likelihood of success, the nature and complexity of the claim, the expense and risk of pursuing it, the amount of the expected recovery and who is to receive an award of costs. The lawyer and client may agree that, in addition to the fee payable under the agreement, any amount arising as a result of an award of costs or costs obtained as a part of a settlement is to be paid to the lawyer, which may require judicial approval under the governing legislation. In such circumstances, a smaller percentage of the award than would otherwise be agreed upon for the contingency fee, after considering all relevant factors, will generally be appropriate. The test is whether the fee, in all of the circumstances, is fair and reasonable.

[2] Although a lawyer is generally permitted to terminate the professional relationship with a client and withdraw services if there is justifiable cause as set out in rule 3.7-1, special circumstances apply when the retainer is pursuant to a contingency agreement. In such circumstances, the lawyer has impliedly undertaken the risk of not being paid in the event the suit is unsuccessful. Accordingly, a lawyer cannot withdraw from representation for reasons other than those set out in rule 3.7-7 (Obligatory Withdrawal) unless the written contingency contract specifically states that the lawyer has a right to do so and sets out the circumstances under which this may occur.

Statement of Account

3.6-3 In a statement of account delivered to a client, a lawyer must clearly and separately detail the amounts charged as fees and disbursements.

Joint Retainer

3.6-4 If a lawyer acts for two or more clients in the same matter, the lawyer must divide the fees and disbursements equitably between them, unless there is an agreement by the clients otherwise.

Division of Fees and Referral Fees

3.6-5 If there is consent from the client, fees for a matter may be divided between lawyers who are not in the same firm, provided that the fees are divided in proportion to the work done and the responsibilities assumed.

3.6-6 If a lawyer refers a matter to another lawyer because of the expertise and ability of the other lawyer to handle the matter, and the referral was not made because of a conflict of interest, the referring lawyer may accept, and the other lawyer may pay, a referral fee, provided that:

(a) the fee is reasonable; and

(b) the client is informed and consents.

3.6-7 A lawyer must not:

(a) directly or indirectly share, split, or divide his or her fees with any person who is not a lawyer; or

(b) give any financial or other reward for the referral of clients or client matters to any person who is not a lawyer.

Commentary

[1] This rule prohibits lawyers from entering into arrangements to compensate or reward non-lawyers for the referral of clients. It does not prevent a lawyer from engaging in promotional activities involving reasonable expenditures on promotional items or activities that might result in the referral of clients generally by a non-lawyer. Accordingly, this rule does not prohibit a lawyer from:

(a) making an arrangement respecting the purchase and sale of a law practice when the consideration payable includes a percentage of revenues generated from the practice sold;

(b) entering into a lease under which a landlord directly or indirectly shares in the fees or revenues generated by the law practice;

(c) paying an employee for services, other than for referring clients, based on the revenue of the lawyer’s firm or practice; or

(d) occasionally entertaining potential referral sources by purchasing meals, providing tickets to, or attending at, sporting or other activities or sponsoring client functions.

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3.6-9 Intentionally left blank.

3.6-10 Intentionally left blank.

3.6-11 Intentionally left blank.

Prepaid Legal Services Plan

3.6-12 A lawyer who accepts a client referred by a prepaid legal services plan must advise the client in writing of:

(a) the scope of work to be undertaken by the lawyer under the plan; and

(b) the extent to which a fee or disbursement will be payable by the client to the lawyer.

Solicitor’s Lien

3.6-13 A lawyer must not assert a solicitor’s lien against property of a client who is unable to pay the lawyer’s account in circumstances in which to do so would materially prejudice the client.

Commentary

[1] A lawyer is entitled to assert a solicitor’s lien over files, documents, money or other personal property of a client which is in the possession of the lawyer until the client has paid all of the lawyer’s outstanding accounts. This retaining lien is possessory only and there are no means by which a lawyer can actively enforce it. As a general rule, however, a lawyer is not obliged to give copies of file material to the client or new counsel or even allow inspection of this property while asserting a lien. Conversely, a lawyer who withdraws without just cause in the course of a matter loses the possessory lien over the client’s documents and must deliver the materials to the client or new solicitor. Some original documents such as corporate records required by law to be kept elsewhere cannot be the subject of a solicitor’s lien.

[2] Liens claimed on property recovered or preserved, sometimes referred to as “charging liens” can only be asserted for the costs properly incurred in recovering or preserving the specific property in question.

[3] A lawyer has a duty to decline to enforce a lien for non-payment of legal fees if the client is unable to pay and assertion of the lien would materially prejudice the client’s position in any uncompleted matter (material prejudice being understood to exceed mere inconvenience to the client). For example, a solicitor’s lien should not be enforced when a trial or hearing is in progress or imminent. Nor should a lawyer enforce a solicitor’s lien for non-payment if the client is prepared to enter into an agreement that reasonably assures the lawyer of payment in due course.

[4] Special considerations apply where a lawyer retained under a contingency agreement seeks to assert a lien for unpaid fees. This is because a contingent fee is generally not collectible until the completion of the matter. Where a lawyer withdraws or is discharged, the lawyer cannot insist on payment absent a provision in the contingency agreement allowing the lawyer to do so.

Accordingly, the contingency agreement should clearly state what fees and disbursements will be

payable in the event the lawyer withdraws or is discharged. A lawyer who is discharged or withdraws with just cause may require the client to pay outstanding disbursements prior to releasing the file only if the contingency agreement provides that the lawyer is entitled to full payment of the disbursements regardless of the outcome of the litigation. The lawyer may impose a trust condition on the new lawyer that file materials are forwarded on the condition that the former lawyer’s fees are paid at the conclusion of the matter. When imposing such a trust condition, the former lawyer must acknowledge that the client retains the right to assess the lawyer’s account through the courts or to be arbitrated in accordance with the rules of the Law Society.